"At least 40 per cent of all businesses will die in the next 10 years... if they don't figure out how to change their entire company to accommodate new technologies." - John Chambers, Chairman of Cisco System
This quote does not mean that 40 per cent of luxury brands will disappear. The number can be much lower. However, this does not mean that luxury brands can avoid digitalization, which can help them in branding, sales, marketing, customer experiences and business operations overall. Digitalisation can be used in almost every business process in order to improve efficiency. However, it is almost impossible to avoid short-term gimmicks and bad investments because we do not exactly know where our future is heading.
For new startups, going digital is quite easy because new businesses are typically created around digital services: websites, social media channels, social media advertising, blogging, marketing automation, CRM, email marketing, email systems, online statistics, payment systems, online sales, online customer service and many others. This list can sound exhausting but many startups barely use any money or they use only a tiny amount of funds to get everything up and running. Still, there is a major challenge for brands, which are fully online because online shopping is not as profitable as you may think, according to Statista. Therefore, digital marketing is the way to go forward and it can provide the required results.
New Startups Have Flat Organisations And Low-Cost Structures
Internal communications flow easily and flat organization structures make decision making processes fast. New startups learn to behave like modern lightweight organizations from the beginning and they can keep their costs low - or they do not have unnecessary costs like their traditional competitors.
Startups Confront Fierce Competition
However, new startups have a low amount of brand awarenesses and loyal customers. At the same time, they have very thin business networks, processes, and logistics systems. Hence, startups have a low amount of resources and market know-how but they have the potential to grow with modern business models and structures if they can lure enough of customers to generate profits. Still, there are lots of loyal customers who are not going anywhere, and this makes life hard for newcomers.
Digital Transformation Is About Comprehensive Transformation
This is the challenge with analogue businesses, which are trying to adapt to change by going through digital transformations, which also requires changes in corporate cultures. Digital transformation does not only mean opening up websites and social media channels, but it is also about a comprehensive change in the whole business in order to thrive in the modern economy. "Comprehensive transformation" would be the right phrase to describe the current phenomenon. However, modern websites and active social media marketing can thrive into new sales. This can be a major relief for brick and mortars.
Digital Investments Should Add Value For Customers
"If you make customers unhappy in the physical world, they might each tell 6 friends. If you make customers unhappy on the internet, they can each tell 6,000 friends." - Jeff Bezos, Founder and CEO of Amazon
When brands understand that buyers are increasingly digital. Then they should concentrate on how marketing, sales, customer service, business processes can add value for customers by enhancing their external and internal digital performances. Artificial intelligence and automatization can automate workflows in order to save resources and give more time for creatives, marketers, and salespersons to concentrate on customers.
Digital Transformation Can Drain Your Profit Margins
According to Harvard Business Review's article, Why So Many High-Profile Digital Transformations Fail, by Thomas H. Davenport and George Westerman, most digital transformations fail because digital investments have not provided enough of return on investments, they have increased internal messiness, and they did not solve business challenges. Digital transformation means investments in skills, projects, infrastructure, and, often, in cleaning up information technology systems, according to Davenport and Westerman. Highly expensive digital investments have hurt the profits of many businesses, which are still are ahead of their competitors, and this means that technical leadership does automatically equal with higher profits and improved revenues. These businesses are not in sync with market readiness. Still, brands must be prepared for artificial intelligence, virtual reality and augmented reality. How much is enough with digital investments? Should you behave like startups with their digital spending, hence, trying to get almost everything for free of charge and with extremely low costs?
"You Have To Start With The Customer Experience And Work Backwards To The Technology"
Joseph Godsey, Global Head of Digital Brand Commerce at Adidas said the brand has three strategic priorities in its digital transformation customer experience, and these steps are premium, connected and personalized. Luxury brands can replace the word premium with luxury and there is an effortless strategy to follow, which is around buyers. Personalized luxury connections can enhance customer loyalty and help buyers glide through the buying process - and it does not matter if the actual purchase happens online or in the shop. Going digital means that go there where your customers are on the internet and try to figure it out how and where do you want to serve them. Luxury buyers can be extremely straightforward because they may have browsed a brand's website, watched online videos on YouTube and seen a couple of pictures on Instagram, and these may have triggered a desire to buy. Keep it simple and keep your costs low by going lean. As the founder of Apple Steve Jobs famously said: "You have to start with the customer experience and work backwards to the technology."
Published in Luxury Sales Academy.